The Chinese Ministry of Commerce (MOFCOM) has blocked the contemplated P3 Network, a container shipping alliance between MSC, Maersk, and CMA CGM. The parties immediately abandoned their plan for the proposed alliance. The decision comes after US and European competition authorities had already approved the agreement, and shows that MOFCOM determines its own course. Transactions that require MOFCOM approval must therefore be managed carefully.
Since the introduction of the merger notification procedure in China in 2008, MOFCOM has reviewed approximately 800 transactions. It has imposed restrictive conditions in 23 cases and, before its decision on the P3 Network, had rejected only one transaction (Coca Cola’s contemplated acquisition of the Chinese juice maker Huiyuan, in 2009).
In its decision dated 17 June, MOFCOM states that it blocked the creation of the P3 Network because the parties had not provided sufficient evidence that the benefits of the P3 Network would outweigh its harm to competition. The decision notes that the proposed alliance would result in a combined market share of about 47% and would greatly increase market concentration in the sea route between Asia and Europe. MOFCOM seems to treat the alliance between the three parties as a full merger, whereas the parties envisaged an operational rather than a commercial cooperation.
The MOFCOM decision was published on the very last day of a lengthy review process. The parties announced the proposed P3 Network on 18 June 2013. The parties submitted their draft MOFCOM notification on 18 September 2013. MOFCOM formally accepted the submission on 19 December 2013, and subsequently took it to an extended Phase II review. Meanwhile, the P3 Network was cleared without any restrictions by the US Federal Maritime Commission on 24 March 2014 and by the European Commission on 3 June 2014.
The MOFCOM decision shows once more that transactions that require MOFCOM approval must be managed carefully. Parties should engage advisors to assess any issues as early as possible and should prepare for a review process that involves significant time and effort.